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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16580
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Question.- Im a tax preparer have a client that does

Customer Question

question.- Im a tax preparer have a client that does cleaning on houses and during the entire year she deposit $45817.00 but of course she only had like $3500.00 in expenses but did not pay herself a salary and of course she does not have the $42317.00 because she took money to survive so what isthe amount that she needs to report on the schedule C if she did not pay herself a salary , how does that work , she is a sole proprietor , and she has 3 small kids , single mother living with them , what is the amount that she need to report, please advise I really need help on this one because not sure what to do ?
Submitted: 1 year ago.
Category: Finance
Expert:  Megan C replied 1 year ago.

Thank you for your question.

She will fill out a schedule C, and since she's a sole proprietor pay self employment taxes. She cannot pay herself a salary on a schedule C. You would take her total income, less her expenses -- and that would be her taxable income. She will then pay self employment taxes and income taxes on the amount.

Next year she will need to plan better. If she does not have the funds, she still needs to file the return and see if she can set up a payment plan.

Please let me know if you need anything additional. If not, please rate positive.

Customer: replied 1 year ago.
WOOOOOO , so the only way that she take money is is she converts to LLC the she can take draws. ?
But what about the owners draw that she does during the year , like for example $2000.00 every month so she will take $24000.00 at the end of the year she does not have to pay taxes on that right ? because those are owners draws ?
Expert:  Megan C replied 1 year ago.

No. She pays tax on her whole income on her personal tax return.

This is very common. I hope you realize this as a preparer...

Customer: replied 1 year ago.
Expert:  Megan C replied 1 year ago.

They are not deducted. Sole proprietor is all right on the 1040. Schedule C. All income less expenses. Draws are not an expense.